Defence stocks rally as Operation Sindoor boosts sentiment; Mazagon Dock, HAL among top gainers

With the geopolitical situation intensifying, the sector may see upside as investors bet on increased government procurement and policy support for domestic defence production.

Defence stocks rallied on Wednesday after the Indian Army and Air Force carried out precision strikes on nine terror bases across the Line of Control under Operation Sindoor, lifting investor sentiment in the sector. The operation, aimed at camps operated by banned outfits like Jaish-e-Mohammed and Lashkar-e-Taiba, has heightened expectations of increased defence spending and fresh orders.

Shares of Mazagon Dock Shipbuilders jumped 2 percent, while Hindustan Aeronautics Ltd (HAL) rose 1.5 percent and Bharat Electronics Ltd (BEL) gained 1.22 percent. The broader Nifty Defence index climbed nearly 1 percent, reversing the previous day’s losses as investors rotated back into defence counters.

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The rally came a day after profit-booking was seen in Tuesday’s session, when BDL, HAL, and Mazagon Dock had slipped amid broader market weakness. With geopolitical tensions intensifying, market participants now expect increased focus on the ramping of defence production and a likely boost in government procurement.

Among the targets hit in the operation were key terror headquarters in Bahawalpur, Tehra Kalan, Kotli, and Muzaffarabad—marking a strong response to recent ceasefire violations and the April 22 terror attack in Pahalgam that killed 26 people.

"I think defence spending is on a structural rise as the world becomes a more dangerous place. And frankly, the flip side of that is that stock market multiples globally, and don't necessarily do great if there's more global risk intentions of war, but certainly defence would be an area that should structurally benefit from this," Arvind Sanger of Geosphere Capital Management told CNBC-TV18.

Investors will now track further official statements and policy cues that could signal the scale and pace of upcoming defence-related spending.

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